Photo: AP/Seth Wenig, file
Photo: AP/Seth Wenig, file
September 22, 2017 06:57 PM
Uber will lose its license to operate in London because it may be endangering public safety and security, the local regulator said Friday, in a severe blow to a company already facing big questions over its corporate culture.
The company, which has been beset by a litany of scandals over its management style — from accusations of sexism to the illegal use of software to trick regulators — was told it was not "fit and proper" to keep operating in London, where it has 3.5 million passengers and 40,000 drivers.
The regulator, Transport for London, said it "considers that Uber's approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications."
It cited instances in which Uber failed to report serious criminal offences as well as its penchant to deceive regulators in its decision to not renew its license when it expires on Sept. 30. Uber said it will appeal, during which time it can continue operating.
The decision startled many — even though the ride-hailing business has many critics. The city's black-cab drivers — who spend years learning the city streets to pass the famed "Knowledge" test — objected to the interlopers who undercut their business. Unions objected to the company's treatment of its workforce.
In a city where the Labour Party is in the majority, many of these issues — particularly in terms of its treatment of employees — would have resonated with the opposition party's voters. Labour Mayor Sadiq Khan was quick to endorse the decision of an agency he supervises.
"It's a technical decision that picks up the spirit of the age," said Tony Travers, an expert on local government at the London School of Economics.
Uber had been warned. Earlier this year, Transport for London renewed its license on a limited basis, giving it six months to address concerns.
Khan said that any operator of taxi services in the city "needs to play by the rules."
"Providing an innovative service must not be at the expense of customer safety and security," he said. "I fully support TfL's decision — it would be wrong if TfL continued to license Uber if there is any way that this could pose a threat to Londoners' safety and security."
For its part, Uber accused the city of caving in to special interests "who want to restrict consumer choice." It issued a statement to its users, starting an online petition to reverse the decision that had 375,000 signatures late Friday. Uber said the ban would show that London is closed to innovative companies.
Uber's new CEO Dara Khosrowshahi, in a note to employees obtained by The Associated Press, wrote that he disagreed with the decision but it was based on past behavior.
"The truth is that there is a high cost to a bad reputation," he wrote. "It really matters what people think of us, especially in a global business like ours."
If its ban is upheld, Uber will have to show that it is changing in order to get back into the lucrative London market, said Jan Dawson, chief analysts for Jackdaw Research in California.
"The fact that Uber is so mature and broadly used in London means it's very unlikely that it will be permanently banned there - the political fallout would just be too great."
Uber drivers like James Farrar, the chairman of the Independent Workers' Union of Great Britain's United Private Hire Drivers branch, wondered how they would pay their bills.
"This is a devastating blow," he said, noting that many people now "face losing their job and being saddled with unmanageable vehicle-related debt."
Uber, founded in 2010 in San Francisco, has often faced opposition as it expanded. Taxi drivers complain that Uber drivers don't have to comply with the same licensing standards, giving the ride-hailing service an unfair advantage and placing the public at risk.
The company, which provides a smartphone application that connects passengers with drivers who work as independent contractors, argues it isn't a traditional transportation company.
Police in London accused Uber last month of not reporting a sexual assault by a driver on a passenger, allowing the driver to strike again. Metropolitan Police Inspector Neil Billany suggested in a letter that the company was putting concerns for its reputation over public safety.
At the time, Uber said it was surprised by the letter and that it had a good working relationship with the police.
But the company has been dogged by questions on its workplace culture. In July, former CEO Travis Kalanick resigned following criticism of his management style. Some 20 people, including some managers, were fired in June amid allegations of sexual harassment and bullying.
Its aggressive corporate culture has resulted in litigation around the world. John Colley, a strategy professor at Warwick Business School, said poor values ultimately bring companies down. Uber is now largely banned from France, Spain and Belgium, and it is facing litigation and investigations around the world, he said.
"There is a very long list of businesses who have suffered for failing to uphold the level of values necessary," Colley said. "Until Uber gets this message then it will suffer lost trade as a result of its deteriorating reputation."
In the meantime, many Uber users could be left by the side of the road. More traditional services, like the black cabs or private-hire cars, are more expensive.
Restaurant worker Rio Kato cited the company's cheaper rates as the reason for using Uber.
"For me it is bad news, because I work at the restaurant — a Japanese restaurant — and it finishes very late," Kato said. "And sometimes there is no bus service, no Underground (metro), so sometimes I use Uber. If it is finished, I have a problem."
The Associated Press
Updated: September 22, 2017 06:57 PM
Created: September 22, 2017 05:42 AM
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